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Talking about diversity in Trustee Boards

Diversity and trustee boards has been on the agenda for quite some time.  The pension industry may not feel as though it is at the cutting edge of society,  but it has recognised that diverse Trustee Boards make for more informed decision making and stronger governance.

All Boards need to be more diverse, but we need to ask what we mean by diversity and where sometimes it is background or approach that adds far more than the legislative focus on gender .

What Makes a Diverse Board?

There are many aspects to diversity but at a time when even finding new trustees for legacy pension schemes is a major challenge, is diversity the cherry on top of the icing when we really need to concentrate on the cake?

With an increasing trend towards Sole Trustee appointments, does this mean that as an industry we now think don’t worry about diverse opinions and skills we should just leave it to “the professionals”?

Whatever the composition of the Trustee Board, it is the diversity of skills and perspectives that adds balance. Many trustees come from finance backgrounds, but financial skills aren’t a prerequisite of good governance and not every trustee needs to a specialist in compound interest and statistics. In the words of David Fairs at the AMNT conference in March 2019, – a good trustee needs more than the ability to tot up a spreadsheet.

What Do You Need From a Trustee?

You need a trustee team that can understand the complexities of areas such as investments but equally you need trustees that can challenge, influence and negotiate – softer skills that are often overlooked in such a technical area.  Sometimes being the person who isn’t embarrassed about asking the obvious questions adds the most value.  Being able to challenge constructively has been shown to be one of the key components for effective investment decision making.

Understanding the perspective of non-pension people is vital for good communication.  With the growth in defined contribution schemes and the increasing number of pension savers under 30, it is surely time that we see the Master Trusts actively seeking to change the demographics of their trustee boards. There is a great opportunity for them to lead the way in reaching out to younger trustees with the resources available for training and structured development.

Being a Pension Trustee

Trusteeship delivers real opportunities for the development of transferable skills. Team building, technical challenges and learning the art of constructive debate are useful in many different roles, so the opportunity for development for younger members of a trustee team are significant.

Unlike the board of a business, a number of trustee board members may have less control as to the composition of their board. Here it is the nomination and selection process for member-nominated trustees that can be addressed and they can actively look to identify candidates that are best suited to the role of a trustee. Although as we know from other walks of life, sometimes you need to see someone in the role to know you can do it. Moving on from the traditional trustee board image needs positive reinforcement to disrupt the status quo.

Targeting Younger Trustees

For defined contribution pension schemes, younger trustees should be actively targeted.  To encourage people to engage with their retirement savings, promoting  good, positive information and helping their peers to  understand why pension saving is important  can only encourage engagement.

To attract a wider group of potential trustees, understanding the skills your board needs, undertaking self-assessments and putting in place a framework that means  the members value the role, will generate greater engagement, meaning more diverse applicants and therefore  more visible representation.

Older legacy defined benefit schemes face different challenges not least how Sole trusteeship can deliver diversity of opinion and  how we build effective challenge to deliver  better informed decisions. A professional trustee doesn’t have all the answers and the Regulator is right to challenge the industry to prove how  it meets the questions raised in recent consultations.

For more information about trustees, pension schemes and other independent trustee services get in touch with our team today. 

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